Why context matters in Africa


Sheena Raikundalia


Sub-Saharan Africa is a growing impact investing destination. Africa has emerged as a major hub of innovation for social enterprises and impact investing globally. Africa was ranked the world’s second most attractive investment destination in 2013.

East Africa is one of the continent’s innovation hubs with more than US $9.3m disbursed by DFIs and other impact investors[1].

With increasing yet controversial evidence that impact investors can achieve financial returns comparable to market indices[2] the growth of the industry seems likely.

A recent benchmarking of impact funds suggests that funds investing in Sub-Saharan Africa have returned 9.7% versus 4.8% for developed markets impact funds.

If you can’t measure it, you can’t improve it
With the growth in the industry, increase in transparency and accountability for the money invested becomes key.  In a survey conducted by Intellecap, 89% of funds in East Africa were measuring impact and stated this was critical.

A key challenge identified by the funds surveyed was the lack of a coherent approach to articulate impacts across the industry.

Attempts have been made by IRIS  and GIIRS  to standardise but most the funds in East Africa use basic excel sheets and so whilst there are hundreds of global tools and frameworks to measure impact these are not being utilised in East Africa.

Further, the majority of these tools capture only the impacts created by the investee companies concentrating on outcome-focused metrics such as jobs created, solar lamps sold, children in school, litres of water purified.

Little is known about the nature of the impact capital itself, its additionality and how it is different from conventional venture capital or private equity.

What is missing is the accountability of funds themselves. For example, fund inputs such as the level of risk taken by the fund, type of investments made and metrics relating to the sustainability of the fund such as the source of capital, management experience, fee structures and provision of technical assistance.

Capturing fund inputs will enable a fund to distinguish itself as an impact fund and report the impact at the fund level in addition to the enterprise level.

Context matters
Different areas within a country are different and businesses will face different challenges depending on the area.   Development indicators such as financial penetration, literacy levels, health vary within a country.

For example, from the 48 counties in Kenya, Madera, Wajir, Turkana and Garissa have the lowest MFI penetration and funds and enterprises improving financial inclusion in those counties create great impact.

Identifying areas of greatest need and recognising funds operating in these riskier areas helps differentiate impact funds and direct capital to the areas with the greatest need.

The dark areas represent counties with low MFI penetration and the lighter areas of colour represent counties with a high MFI penetration.

Intellecap Approach
Intellecap’s assessment shifts the onus of measurement from just the enterprise to the investor, to assess their value addition and risk-taking appetite based on the context of the investment.

As such, in partnership with the International Finance Corporation and the GIZ-SIDBI Intellecap developed Portfolio Risk, Impact and Sustainability Measurement, PRISM to address the gaps.

PRISM whilst compliant with IRIS taxonomy and alternate frameworks like GIIRS adds the contextual dimension capturing fund and geographic context.  PRISM offers 4 distinct lenses for impact measurement:

The PRISM Framework.

Data is key
The entrepreneurial boom and the growth of impact investing in East Africa has been impressive. As more players enter the industry the need for a holistic approach to measurement to ensure accountability and transparency for the money invested is clear.

Funds and other entities that are taking risks and creating impact should capture these inputs and differentiate themselves from pure commercial funds.

As the American Statistician W. Edwards Deming famously said: ‘in God we trust, all others must bring data.’

Sheena Raikundalia is a Management Consultant with Intellecap Africa.


  1. ^ GIIN 2015: East Africa Report
  2. ^ Wharton 2015

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